Testing the profitability of Anaerobic Digestion in a large-scale UK dairy farm

Abstract

Anaerobic Digestion (AD) consists in the transformation of any organic non-woody material by micro-organisms into biogas. This biogas, composed of approximately 60 per cent methane can be further burnt and converted into electricity and heat. The UK’s livestock agricultural sector has tremendous potential to take advantage of this technology, as it produces over 150 million tonnes of animal manure annually. This is a commonly used input to feed anaerobic digestion plants. Furthermore, AD brings additional benefits to the farming community, as it is an environmentally friendly waste management option, and a cost-effective fertiliser production method. The Government’s commitment to the development of AD is portrayed by the recent increase in Feed-In Tariffs, a set price determined by the Ministry of Energy and Climate Change and paid by the energy supplying companies for every unit of electricity generated through renewable sources. This paper tests the economics, return on investment, and overall value of installing and operating a 500kWe anaerobic digestion plant in a large scale UK dairy farm. A discounted cash flow analysis was the utilised method to quantify the farm business value and profitability, and understand how attractive an investment of this type would be for a UK large-scale dairy farmer.